In private hands, a recapitalised Quintis has turned away from its financial services roots.
As a guide to the transition Quintis has made since its corporate implosion half a decade ago, it might be worth comparing the backgrounds of its chief executives before and after its darkest hours.
Founded in 1997 and led for 20 years by entrepreneurial tax lawyer Frank Wilson, the company formerly known as TFS Corporation was more of a financial services business for the greater part of its existence.
High profile and heavily promoted, its early goals were signing up investors into managed investment schemes, which provided up-front tax benefits for agricultural investments otherwise out of the reach for most in the retail market.
Mr Wilson quit as managing director in 2017 as the business struggled under pressure from a short-selling attack that exposed it to intense scrutiny and from which it never recovered as a listed entity.
Fast forward to 2020 and the business had been restructured considerably after being run by external administration and then recapitalised by private equity.
Richard Henfrey was appointed as chief executive, taking the reins from Julius Matthys, a board member who had stepped in to head the business after Mr Wilson quit.
A former telecommunications sales executive, Mr Henfrey had most recently ended a 10-year stint at major vitamins and complementary medicines success story Blackmores, including two years as chief executive.
Talking to Mr Henfrey makes it clear Quintis has become a very different business than that which emerged 25 years ago.
It has completed the transition from financial services sales to what is now an agribusiness with a focus on marketing its commodity.
For the first time in five years the company has started developing a new plantation.
With little fanfare it has begun the process of planting 160,000 sandalwood trees on 330 hectares that previously hosted one of the group’s first crops to reach maturity.
The development is self-funded and, while the plantation may ultimately be sold to institutional investors, there is none of the promotion and marketing that was required to generate the funds under the old business model where upfront sales drove performance.
“You will see us make more noise about sustainability,” Mr Henfrey told Business News.
“In the old business there was a bit of a gold rush mentality.”
Mr Henfrey said the current management had learned from the past and its difficult period of restructuring, and now took a longer-term view on the scale of new development required to balance future market needs.
“The 30-year planning horizon is pretty critical to us,” he said.
Mr Henfrey’s conservatism is reflected in his response to questions around the valuation of Quintis, which, with 200 employees, sits at the bigger end of the Business News agribusiness list in Data & Insights.
“I have been keen to have a less aggressive balance sheet value that uses a more conservative approach,” Mr Henfrey said.
The Quintis boss said taking a conservative approach kept valuations steadier on a year-to-year basis, given the biological assets the business held.
That was easier in the private environment than previously when the company was listed and there was pressure to grow the asset base.
Nevertheless, given harvesting has taken place within the past five years, Quintis has an enviable position as the biggest owner of Indian sandalwood plantations in the world, with 12,000ha and 5.5 million trees.
In the company’s latest available annual report, for the year ending June 30 2020, Quintis valued its assets at $947 million, of which about 60 per cent are trees or post-harvest inventories.
This is well below the 2016 financial year when its assets were almost $1.5 billion, with more than half being trees or inventories.
And, of course, valuations are not just about tree numbers.
The science of growing sandalwood may well be different from those early TFS crops in terms of the planting density, survivability and yield per tree when it comes to harvest time.
A mature sandalwood tree can produce anywhere from 1 kilogram of saleable heartwood to more than 20kg.
Oil production might amount to about 3.5 per cent of a tree’s heartwood’s weight.
But sandalwood has value beyond the oil form, albeit prices of about $2,500/kg make the extract appear very valuable indeed.
Of course, the new Quintis is not a complete reinvention of the old model.
Even under previous management, there was talk of sustainability and seeking certification for its management practices, as well as an increasing focus on developing markets for volumes expected after almost 20 years of sales.
As early as 2008, the company bought Albany sandalwood oil producer Mount Romance, a business it continues to run (although the name has recently been changed).
Former Mount Romance owner Steve Birkbeck had invested considerable effort in reaching out to the big fragrance markets to generate long-term interest in his products.
Mr Henfrey said with the fine fragrance sector based in Europe, the global aromatherapy sector and traditional Chinese medicine were now the staple markets for Quintis.
However, unsurprisingly given his background, he sees an emerging market within skincare products, moisturisers and some therapeutics, all broadly labelled as cosmetics.
“We have invested quite a lot of money into proving the benefits of sandalwood oil in a skincare regime,” Mr Henfrey said.
In summary, he describes Quintis as a global ingredient business to several sectors that have health and happiness at their core.
“We see ourselves in the wellbeing sector,” he said.
The new Quintis sandalwood plantation is its first for five years.
Mr Henfrey notes these key markets for Quintis are very much at the discretionary end of the spectrum and are acutely tuned into sustainability.
That is something the Quintis chief believes gives it an edge as the dominant player in the legal and ethical sandalwood sector.
It is a process that started under the company’s old regime.
In 2016, it engaged sustainability consultant Australian Centre for Corporate Social Responsibility to help it prepare for its first sustainability report using the Global Reporting Initiative.
Nevertheless, it is worth noting that the results of these efforts transcended a volatile period of disruption as the company’s former bondholders took control of Quintis, turned the debt into equity and provided the funding to get the business where it is now, on the cusp of profitability.
Mr Henfrey said the company had now attained the highest accreditation available from the international benchmark in that space, the Forest Stewardship Council.
And there is more that Quintis could expect to benefit from as the world changes.
The plantations absorb significant CO2 as they grow, almost 200,000 tonnes per annum, especially as they are parasitic and require two host trees each to be planted with them, making them less of a monoculture.
Mr Henfrey also sees potential for the waste biomass after harvest to be used as an energy source.
Meanwhile, the company is now trying to navigate past some of the difficulties created by COVID in the regions it operates, notably across the top end of Australia where it used to rely on transient labour.
A small group of workers had come in from Timor-Leste under the Pacific Australian Labour Mobility Scheme, he said.
“A lot of our work is seasonal,” Mr Henfrey said.
“Typically, we have used backpackers.
“There has not been too many of them and, as volumes increase, we have to have a more permanent workforce.”
He said the company was moving towards engaging more employees from the local indigenous communities.
“We have started doing that and had good results,” Mr Henfrey said.
